Korean Air’s merger with Asiana a step closer as U.K. may approve

2022.11.30 10:52:01 | 2023.04.04 14:20:02

Korean Air Lines and Asiana Airlines [Photo by Kim Ho-young]이미지 확대

Korean Air Lines and Asiana Airlines [Photo by Kim Ho-young]

Korean Air Lines Co. is a step closer to receiving an approval for its merger with smaller rival Asiana Airlines Inc. from the U.K. government after the country’s antitrust authority signaled that it would accept amendments made by the Korean airline to the merger proposal to prevent monopoly.

“There are reasonable grounds for believing that the undertakings offered by Korean Air, or a modified version of them, might be accepted by the CMA under the Enterprise Act 2002,” U.K.’s Competition and Markets Authority (CMA) announced on Monday.

CMA seems to have judged that Korean Air’s corrective measures can resolve concerns about limited market competitiveness. Korean Air is said to have suggested the market competitiveness could be maintained if a British airline offered new Incheon-London flights.

The comments from the U.K. CMA boosted Korean Air shares, closing 2.65 percent higher Tuesday at 25,200 won ($19.1). Asiana Airlines rose 12 percent to 13,050 won, while Asiana IDT Inc., an IT company 76 percent owned by Asiana, soared by the daily 30 percent limit to 15,500 won. Shares of budget carriers owned by Korean Air and Asiana, including Jin Air Co. and Air Busan, also rose.

Korea Air shares inched down 0.40 percent at 25,100 on Wednesday morning while Asiana Airlines lost 2.68 percent to 12,700 won after rallying on the previous day.

Korean Air still needs approvals from the U.S., China, European Union and Japan for its union with Asiana Airlines to be completed.

On Nov. 15, CMA requested Korean Air to submit a plan to resolve its monopoly, holding of its approval of the merger, saying the combination of Korean Air and Asiana could increase ticket fares and reduce service quality.

At that time, CMA said that it would decide whether to accept the Korean Air proposal or initiate an in-depth second-stage investigation by Nov. 28. But it has accepted the airline’s corrective action plan and leaves only its final decision to be made. CMA plans to confirm the approval soon after hearing market opinions on this corrective measure.

[Photo provided by Korean Air]이미지 확대

[Photo provided by Korean Air]

The industry believes that the U.K. authorities will approval the merger as Korean Air’s corrective measures have been accepted. Korean Air said, “We are positive about the U.K. competition authority’s decision. We plan to cooperate faithfully so that the business combination review can be completed as soon as possible.”

Although the U.K. is a voluntary reporting country for the merger, its decision could have a positive impact on EU’s review, which is a mandatory reporting country. That’s because the aviation market in the U.K. is similar to France and Italy.

Voluntary reporting countries refer to countries where business combination reporting isn’t mandatory, but Korean Air must voluntarily report in consideration of possible future investigations by authorities. Approvals from voluntary reporting countries are also needed along with those from mandatory reporting countries before business combinations are possible.

Korean Air has received approvals from nine out of 14 mandatory and voluntary reporting countries, including South Korea, Malaysia, Australia and Turkey.

In February, the Korea Trade Commission gave its approval on condition that some slots and traffic rights of some routes, such as New York, France and Jeju, be transferred to other airlines and to limit fare increases.

Korean Air’s merger with Asiana still faces obstacles after the U.S. Department of Justice said on Nov. 16 that its review would take time. Flights to the U.S. accounted for 29 percent of Korean Air’s sales in 2019 before the pandemic.

By Seo Jin-woo, Kim Jung-beom and Kyunghee Park

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